Property prices in Australia have fallen
for 12 consecutive months according to the latest CoreLogic data. While the
current slide is still mild by historic standards, some reports are forecasting
much bigger falls over the next 12 months. There are already clear warning
signs of renewed downward pressure, with national demand falling, auction
clearance rates continuing to slide across the country, and Melbourne
overtaking Sydney as Australia's weakest housing market.

According to CoreLogic data from the end of
September, national house prices have fallen 2.7 percent over the past 12
months. Australia's capital cities are responsible for the drop at -3.7 percent
growth, with regional areas rising 1.2 percent over the past year. Sydney was
the worst performing city at -6.1 percent growth, followed by Darwin at -3.7
percent, and Melbourne at -3.4 percent. The median price for a home in Sydney
is $847,948, followed by Melbourne at $697,457, and Brisbane at $495,474.

Despite the expected results over 12 months,
Melbourne has firmly overtaken Sydney as the weakest housing market in
Australia when year-to-date figures are compared. Since January 1 this year,
the median price in Melbourne has fallen by 4.4 percent compared to 4.1 percent
in Sydney. While Sydney has been experiencing downward pressure for some time
now, the fact that Melbourne is taking over has led some commentators to
predict a more protracted correction than first forecast.

While not predicting a market crash, UBS
are one organisation who have come out saying the market will remain under
significant pressure for some time to come. According to George Tharenou from
the Australian Economics team at UBS, “We’ve long expected the value of home
loans to drop by a cumulative 20 per cent, which is the main driver of home
prices, which consequently will likely fall 5 per cent plus... We expect
further credit tightening, and the RBA’s lack of willingness to cut rates this
time, to see the longest house price downturn in decades.”

In another clue that the market is looking
down, Australian preliminary auction clearance rates fell to just 50.7 percent
at the start of October. Softer results were seen in both Melbourne and Sydney,
with the ongoing decline in both capitals suggesting a gulf between vendor and
buyer price expectations. Auction clearance rates have been on a downward trend
since early 2017, which according to CoreLogic, points towards softer prices in
the months ahead. Demand for residential dwellings is also falling in key markets,
down by 23 percent in Sydney and 20 percent in Melbourne according to
realestate.com.au’s October Property Outlook Report.

Other data released this month supports a
prolonged downturn, which could go on for years rather than months. According
to the NAB Residential Property Index, confidence among property investors has
fallen to its lowest level in seven years. According to the Westpac Consumer
Sentiment Survey, expectations for house prices have fallen to their lowest
level since 2009. According to the Australian Bureau of Statistics, the value
of Australian housing finance fell to its lowest level since January 2016.